Gamma-phase lithium aluminate (LiAlO2) is a ceramic powder used in molten carbonate fuel cells (MCFCs) and in other nuclear and ceramic applications. Upon exposure to water vapor and carbon dioxide at 25 °C, we have observed that gamma-LiAlO2 converts to lithium aluminum carbonate hydroxide hydrate, Li2Al4(CO3)(OH)12·3H2O(LACHH) and Li2CO3. The conversion was observed by X-ray diffraction (XRD) and carbonate analysis. An equation for the conversion is given, and the morphology is determined by scanning electron microscopy. A high-temperature XRD study and thermogravimetric/differential thermal analysis (TGA/DTA) showed that LACHH decomposes at 250 °C. The decomposition products of LACHH and Li2CO3 react to form first alpha-LiAlO2 and then gamma-LiAlO2 at temperatures of 650 and 1000 °C, respectively.